Dive Brief:
- Post Holdings is spending $880 million to buy out the remainder of 8th Avenue Food & Provisions, which owns the Ronzoni pasta brand and makes a variety of dried goods such as granola and nuts.
- 8th Avenue was formed in 2018 when Post transferred its private label business to a new entity. Post sold a 39.5% stake in that entity to private equity firm THL, which it is now buying back.
- The deal is expected to close July 1, and Post will take over about $111 million in leases as part of the transaction. The acquisition further deepens Post’s presence in both private label and branded food, allowing it to provide a wider range of price points.
Dive Insight:
As economic headwinds prompt some consumers to pull back on spending, Post is positioning its business to remain competitive, regardless of the environment.
In recent years, Post has built a presence in a particular food category and then ensured the company has both branded and private label offerings to sell to retailers and consumers. With its latest acquisition, Post will have a deeper presence in both segments for foods, such as nut butter, cereal and dry pasta.
Once the transaction closes, Post will become the top private label player in peanut and tree nut butter as well as granola, while being No. 2 in dry pasta. 8th Avenue recorded net revenue of $1.1 billion in its fiscal 2024 year.
“With this acquisition, we further our strategy of tactical private label positioning alongside leading brands,” Post president and CEO Rob Vitale said in a statement.
The purchase also creates other benefits for Post, whose branded food products include Grape-Nuts cereal, Bob Evans refrigerated sides and Peter Pan peanut butter.
According to an investor presentation provided by the St. Louis-based company, the addition of the rest of 8th Avenue secures Post’s Peter Pan nut butter supply and enables the food manufacturer to become more meaningful to retail partners in the category.
The acquisition enables greater participation in the growing granola sub-category of ready-to-eat cereal, complementing Post’s existing business. In addition, Post gains exposure to dry pasta, something the holding company did not have before.
Post described the transaction as “an attractive capital allocation opportunity.” The purchase is expected to increase cash flow and create synergies of about $15 million annually.
Post, which traces its roots to being a cereal-only company, became a sprawling food company with a presence in many categories through M&A.
Similar to that acquisition strategy, 8th Avenue was formed seven years ago to look for M&A opportunities, eventually acquiring peanut butter and Ronzoni pasta. However, Post said a challenged capital structure following COVID-19 made it hard for 8th Avenue to fully execute its M&A strategy.
Post noted last month that tariffs and economic uncertainty have slowed “what was an active M&A pipeline,” according to Jeff Zadoks, the company’s COO. He added that Post would focus on “smaller tactical transactions” that have a “clear line of sight to synergies.”
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